According to wikipedia, A watermark is a recognizable image or pattern in paper that appears as various shades of lightness/darkness. Now a days everyone is aware of a water mark. To see what a watermark is, please see the following picture.
(Click on the image to see it in larger view)
Now, how to do this? This is quite simple, please follow given steps to add a watermark to Word document (applied for Microsoft Word 2003-2010):
Adding watermark to Microsoft Word 2003-2010:
1. Open Word document that you want to add watermark to.2. Select "Page Layout" from the top menu,

3. Under Page Layout select Watermark:
4. Under Watermark you will see some templates as well as some Custom Watermark. The templates are of do not copy and confidential so you need to select Custom Watermark to insert your own watermark.
5. Now select Custom Watermark..
You will see a window like this:

There will be three options as shown in figure:
1) No watermark (this will be selected by default)
2) Picture Watermark
3) Text Watermark
Steps To insert an image watermark:
- Select the "Picture watermark".
- Then click on the button "Select Picture...".
- Navigate to the directory where your watermark picture is located. Select it and click "Insert".
- Select a customized scale if desired, then click "OK".
- The image is now inserted into your document as watermark.
Steps to insert a "Text watermark":
- Select the "Text watermark".
- Then, either select a pre-defined text from the drop-down, or type in your desire text on the "Text" field.
- Customize your watermark with other options in this dialog such as text size, text color, etc, then click "OK".
- Watermark is now inserted into your document.

